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Frequent Contributor

Corn Price in Relation to Yield

Question for all you corn guys out there. Where do you see harvest prices at if corn yield projections average 155? What about the other possibilties of say 145 or 150? I read today that Allendale is at 156. Just curious how much downside risk / upside potentail you all think is there if one of these yields come to fruition? 

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Honored Advisor

Re: Corn Price in Relation to Yield

downside risk ---------- limited, very limited. With good carry over supply, The corn market seeks breakeven and uses it to shake corn loose.  The threat of loosing money creates more selling than the optimism of a high price.  In the upper $4 range we are at or close to the high breakeven generated by the profiteering on the drought.  $3 corn and the market and even government will start worrying about supply again. Promotional Incentives will kick in to encourage planting and supply.

 

Upside potential------- better but still limited.  This downward trend(the long tail) has had a nice run on nothing put potential of the next two crops.   155 is probably an average crop because the drought took a lot of "marginal" acres out of corn production(a lot of marginal irrig. acres as well).  Fall harvest risk is real with a late crop, but it is over blown by the fact that we haven't seen cool wet falls for so long. Example ---- Ask a kansas elevator operator how much he uses the grain dryer.  Not that many years ago they were running full time from Sept to november to get the crop out of the field.  Now there are large storage facilities built without one.  They will be scrambling to install one as the "trend" changes.  On the positive side --- we have three users----feeders, still a healthy industry (still worried more about numbers than feed), ethanol, wow to the profit margins at $4.50 corn with crude at $100+(thats healthy), and exports---- The rest of the world is catching up to us on the expense side of the ledger as well.  I see worries about acre switches in SA caused by price relative to expenses. -------- The big thing is we did not kill any user industries last year with $7 corn.  ------ The bad side is prices last year were fueled by fed monitary policy as well as the drought and I have never been able to tell how much.

 

short version -------- upside potential but probably limited unless we see a killer frost in the first week of Sept.    3 weeks away!!!!!!!!

 

As I type it is 64 degrees in the okla panhandle, headed for a predicted high of 77.  August 9th.  These are the august days that give the dust bowl area 90-100 bushel dry land corn or milo crops.  As they come back in the after drought years we will have to try to remember how to market.

Production for three years has been tough overall.  But we haven't been marketing for a long time.  Just selling.  Our skills will have to get better.

 

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